MUMBAI: Vedanta Ltd had followed all prescribed procedures in undertaking the funding of parent Volcan’s acquisition of Anglo American Plc through a structured deal by its wholly-owned subsidiary Cairn India Holdings Ltd, the board clarified to shareholders at the annual shareholder meeting on Thursday. Shareholders at the meeting raised the issue that had made them nervous when the deal was disclosed. Former SEBI chairman UK Sinha, who is a non-executive independent director on Vedanta board, answered on the governance aspect of the issue.
“This investment was done by following the prescribed procedure. The audit committee and the boards approved it, and it was also disclosed at the first instance in December - December quarter disclosures. Procedures prescribed by SEBI and the Companies Act were also followed. As far as the procedure from the governance point of view, that was also followed,” Sinha said.
The Volcan structure was pretty much a treasury product, a cash management product, explained Arun Kumar GR, CFO. He said he was “very happy to report that approximately Rs 800 crore of income has been booked as a result of this investment, based on the underlying value of the shares that the parent holds in Anglo-American. On the maturity date, which is respectively April and October 2020, the entire cash will come back to Vedanta Ltd as in its subsidiary Cairn. And the profits will be booked in cash, and at this point of time, it is accrued”.
Vedanta in its latest annual report had disclosed that “in December 2018, the Group purchased an economic interest through a structured investment in equity shares of Anglo-American Plc, from Volcan Investments for a total consideration of Rs 3,812 crore. As of March 31, 2019, the transaction was positively marked to market by Rs 1,041 crore”.
India Ratings in May had flagged the issue of voting rights and the option to buy the underlying shares with Volcan in the deal implied a risk of further “leveraging at the parent entities or a likely corporate event”. Chairman Navin Agarwal told reporters that the entire planned capex of Rs 55,000 crore are out of its own internal accruals.